More Costly Oil Is Price of Polish Policy Independence

ByRuth Gruber, Special to The Christian Science MonitorSeptember 11, 1990

WARSAW
— IN the first visible blow from the Gulf crisis to the already embattled Polish consumer, gasoline prices have increased by more than 30 percent. The Solidarity-led government saw it coming, once it decided to adhere to the United Nations economic sanctions against Iraq. It is also a proud sacrifice connected with Warsaw's first major postwar foreign policy decision taken without Soviet pressure or dictate.

``For the first time in this grave conflict we are taking decisions - difficult as they are - on our own,'' wrote commentator Dariusz Fikus in the government-linked newspaper Rzeczpospolita. ``Poland is not going to react to this aggression differently from the rest of Europe. As we enter Europe, we accept the attitude adopted by Europeans.''

Gasoline already was expensive (about $10 a gallon) in a country where the average wage is only about $80 a month.

``Those extra zlotys it's going to cost to fill up the car after today are going to mean something,'' said Mariusz, a Warsaw man heading off in the last days of August to wait in the gas line ``for however long it takes'' before the price went up.

The new gasoline price is expected not only to keep many cars off the road, but - more important - to boost inflation, as higher fuel costs ultimately translate into higher transport and production costs.

So far, none of this ripple effect has been felt, but authorities are clearly worried over the possibility of triggering an inflationary spiral.

Coming on top of a recent 50 percent cut in promised oil supplies from the Soviet Union, the Iraq-induced oil crisis and related economic losses because of the current anti-Baghdad sanctions could become so serious that Polish authorities have formally requested economic relief from the European Community and a dozen other industrialized nations.

Poland is eight months into a ``shock treatment'' economic austerity program, amid a changing of the old communist economy into a free-market system. Living standards have dropped. By the end of the year, about 1 million people are expected to be unemployed because of work-force reductions and closures of inefficient or bankrupt industries.

In the first seven months of the year, real incomes were down by more than 30 percent from the same period last year - but at the same time, the government released figures showing that July was the first month that inflation was actually lower than anticipated.

Ironically, the sharpness of the crisis in Poland is a result of one of the Polish economy's few foreign trade successes.

Poland's foreign debt amounts to at least $40 billion, but Iraq, one of Poland's major economic partners, owes Poland money for arms and other trade deals as well as extensive construction and service contracts. Poland had hoped to be paid back in oil.

Deputy Finance Minister Wojciech Misiag told an Aug. 30 news conference that Iraq owes Poland some 70,000 tons of oil that now will have to be bought on the free market.

The ministers of foreign and economic affairs estimated that so far Poland had lost $28 million in due to the economic sanctions against Iraq.

Total losses could reach $73 million. In addition, losses from future incomplete or planned contracts and trade agreements could add another $1 billion in losses.

The gasoline price hike was a first step. The market had been uneasy all through August as motorists stocked up with gas in canisters fearing an increase.

``We either had to increase prices to [cut demand and] have gas at the pumps, or leave prices low and run out,'' Mr. Misiag said.